By understanding the effects of inflation over time, kids can begin to see the value of saving and investing early as well as making good financial decisions as they grow up.
Inflation causes money to lose value over time, and as money loses its value, purchasing power is less. If purchasing power is less, long-term financial goals will cost more.
When planning for a financial goal with a long-term time horizon, kids are reminded to consider and plan for the effects of inflation. Investing early and considering their time horizon (length of time between now and when they’ll achieve a financial goal) provide a better chance of having enough money when they need it.
Kids are reminded that when they start saving for a goal, it will probably cost more in the future. The example of buying a house as well as calculating the effects of inflation for themselves help put this concept in context.
Part of planning ahead is considering what major purchases may come up down the road. What will it cost to buy a house in 10, 15, or 20 years? Kids might know the price of something today, but because of inflation, they are reminded it could change a lot in the future.
View lesson pages and activities here or download the full Student Workbook. Remember to check the Teaching Guide to know the vocabulary and takeaways for this lesson as well as questions to ask when reviewing concepts with kids.
All materials are free downloadable PDFs, so you easily use what works for you.
A Place of My Own
Nikki is about to finish graduate school and has her sights set on getting her own place. Learn what her grandmother has to say about inflation and how it impacts Nikki’s future financial goal of saving for a house.